By Diane Bartz and David Shepardson
WASHINGTON (Reuters) – The U.S. Department of Defense on Tuesday canceled its $ 10 billion JEDI cloud computing project, reversing the Trump-era award to Microsoft Corp. (NASDAQ 🙂 and announcing a new contract that is expected to include its great technological rival Amazon.com (NASDAQ :).
The contract awarded by the Pentagon in late 2019 was put on hold after Amazon filed a lawsuit challenging then-President Donald Trump’s decision.
Trump publicly mocked then-Amazon CEO Jeff Bezos and repeatedly criticized the company.
Amazon shares closed Tuesday at a record price, up 4.7%, at $ 3,675.74 as its market capitalization surpassed $ 1.85 trillion. Microsoft closed virtually unchanged, up 1 cent a share.
Amazon said in 2019 that the Pentagon’s decision was littered with “egregious mistakes,” which it suggested were the result of “inappropriate pressure from Trump.” The company cited a 2019 book reporting that Trump had ordered the Defense Department to “remove Amazon” https://reut.rs/2V4LqgQ from the JEDI contract.
Recently, in September, the Department of Defense re-evaluated the contract proposals and said that Microsoft’s presentation was the best.
Under the new Biden administration, the Pentagon said Tuesday that Amazon and Microsoft are the only companies that can meet the department’s requirements, but then noted that they will communicate with other cloud providers in the next three months if they also comply. government standards.
Other major cloud companies include Oracle Corp (NYSE :), Alphabet (NASDAQ 🙂 Inc’s Google and IBM (NYSE 🙂 Corp.
The Pentagon expects to have first awards in April 2022 for its new Warfighter Joint Cloud Capability (JWCC).
John Sherman, acting chief information officer for the Defense Department, said he expects both Microsoft and Amazon to win cloud contracts. He said the need was urgent.
“I have to get this now, as soon as possible, hopefully starting as early as April,” Sherman said.
Microsoft said in a statement that the company was confident it “will continue to be successful as the Department of Defense selects partners for new work.” Microsoft could submit a termination offer to recover the costs of the scrapped project, Sherman said.
Amazon’s cloud unit, Amazon Web Services (AWS), said it agreed with the Pentagon’s decision to cancel the contract. Amazon said the initial award “was not based on the merits of the proposals, but was the result of external influence that has no place in public procurement.” AWS added that it looks forward to “continuing to support the Department of Defense’s modernization efforts and creating solutions that help achieve its critical missions.”
In April, a judge refused to dismiss Amazon’s claims alleging that the Trump administration interfered with the Pentagon’s concession to Microsoft after suspending it indefinitely in February 2020.
The now-canceled Joint Enterprise Defense Infrastructure Cloud (JEDI) contract was budgeted for up to $ 10 billion and was part of a broader Pentagon digital modernization with the goal of making it more technologically agile.
“We don’t have an estimate yet, but I wouldn’t stick with the $ 10 billion figure,” Sherman said.
“This plan involves a multi-cloud acquisition through full and open competition, perhaps in early 2025. However, in the short term, we are confident that a direct award path is absolutely necessary and appropriate to enable us to run the business that cloud capabilities are urgently needed by force, “said Sherman.
Republican Senator Chuck Grassley praised the Pentagon’s decision.
“The JEDI contract has been affected by potential conflicts of interest, size, unnecessary delays, and its single-bidder structure,” Grassley said, saying that a new review process … will provide the program with an opportunity for greater public trust. “.